FUD Zilla talked to Godfrey Cheng, Director of Technical Marketing, Graphics Product Group at AMD, about physics and heard NVIDIA never really offered PhysX to ATI. NVIDIA told the press that ATI could use PhysX, but the firm never contacted ATI through proper channels.
Despite the fact that Nvidia said many times that it wants to give PhysX to all that want it, they never contacted ATI through proper channels. Nvidia did voice out, at least to journalists, that if you want to embrace PhysX you need to adopt CUDA, which is not an open standard. AMD / ATI are really not big fans of such proprietary standards.
ATI is betting on Havok's physics technology, which is owned by Intel.